4 Ways To Reduce Your Tax Liability ...With
Equipment Leasing

Take Up to A
$500,000
Deduction!

Section 179 allows smaller business owners who acquire equipment for their
business: machinery, computers, software, and other tangible goods, to
immediately write off the full price of the equipment rather
than depreciating them over several years. Section 179
is ready to enhance your bottom line in 2016/17. If you've been thinking
about buying new or used equipment for your business, then THIS is
definitely the year to do it, because the government is going to give you a
VERY generous tax deduction in 2016. Section
179 applies to new and used equipment purchases, but must be "new to the
business", and also includes certain software and vehicles. Under
Section 179, businesses that spend less than $2,000,000 a year on qualified
equipment,
may write-off up to $500,000 in 2016. The rules are designed for small
companies, so the $500,000 deduction phases out when a business purchases
more than $2,000,000 in one year. (Companies cannot write off more than
their taxable income).

Bonus Depreciation - 50% for
2016 and Benefits of a Non-Tax/Capital Lease

The benefit
of a Non-Tax/Capital Lease is that you can take advantage of Section 179: expense up to $500,000 if the equipment is put in use
during 2016. In addition,
you are allowed an additional 50% first-year depreciation on new equipment.
Examples of Non-Tax/Capital Leases include a $1.00 Buyout Lease, an
Equipment Finance Agreement (EFA), and a 10% Purchase Upon Termination (PUT)
Lease. The sample
calculation below shows how taking advantage of Section 179 can significantly
lower the true cost of the equipment.

Equipment Cost Example: Now
$500,000
Just Passed By Congress - December 2016

Cost of Equipment ($350,000 purchase example)

$350,000

Section 179 Write-Off Amount

($500,000)

50% Bonus Depreciation

$0

Normal 1st Year Depreciation

$0

Total First Year
Deductions:

$350,000

Cash Savings on Your $350,000
Example Equipment Purchase

$122,500

Net 1st Year Cost of Equipment
After Tax Savings

$227,500

Leasing and Section 179

Did you know that your company
can lease equipment and still take full advantage of the Section 179
deduction? In fact, leasing equipment and/or software with the Section 179
deduction in mind is a preferred financial strategy for many businesses, as
it can significantly help with not only cash flow, but with profits as well.

Advantages of Leasing and
Financing

You can deduct the full amount
of the equipment and/or software, without paying the full amount this year.
The amount you save in taxes can actually exceed the payments, making this a
very bottom-line friendly deduction (you are reading this correctly; in many
cases, the deduction will actually be profit).

Tax Code Section Expense Detail
The election, which is made on IRS Form 4562, is for the tax year the
property was placed in service or an amended return filed within the time
prescribed by law. Section 179 property is property that you acquire by
purchase (or capital lease) for use in the active conduct of your business. To ensure property
qualifies, reference IRS Publication 946.

This expense deduction is provided for taxpayers (other than estates, trusts
or certain non-corporate lessors) who elect to treat the cost of qualifying
property as an expense rather than a capital expenditure. Under Section 179,
equipment purchases, up to the amount approved for a given year, can be
expensed (deducted from taxable income) if installed by December 31, 2016. Any
excess above the expensed amount can be depreciated depending on the
equipment type. Not all states follow federal law. Contact your tax advisor
for the specific impact to your business or visit
www.irs.gov.

The
key component of a FMV lease is that the lessee has the option to return
the equipment at the conclusion of the lease--without further
obligation. The lessee may also have the option to purchase the
equipment for its "fair market value" or to
continue leasing the equipment from the lessor. Technically, the lessee does not own the
equipment--it is akin to a rental. The
lessee does not record the equipment as an asset on its balance sheet, nor
does the lessee record a long term liability. The lease is generally treated as an
off-balance sheet, "operating expense" and hence, it is 100% TAX
DEDUCTIBLE.

Accelerate
Your Depreciation

Lower
Your Tax Liability

With
a cash, bank loan or finance type lease purchase you normally recapture
some of your cash expenses by claiming depreciation on the equipment
according to the IRS accepted "useful life" of that
equipment. You may also claim the interest portion as an expense
during the term of any repayment. Depreciation, however, can be
spread over 5-7 years on long-lived equipment. The same equipment on
an FMV lease can (effectively) be 100% expensed during
whatever lease term you select for the lease. For example: you enter into a 36
month FMV lease on equipment that would otherwise have to be depreciated
over say, 5 years and you will effectively have written off all of its
value (less residual) in just 3 years, instead of 5!

Avoiding
the AMT "Double Tax Whammy"

The
Lease Strategy

Under
the Tax Reform Act of 1986 Congress took aim at small to medium sized
businesses that had been reducing their overall tax liability by claiming
depreciation on equipment they had acquired. Although the subject is
rather complex, the net effect is that companies who have used equipment
depreciation to significantly lower their tax liability are subject to a
review that may have the effect of classifying some of those depreciation
write-offs as "tax preferences" and subjecting those same companies to
an additional "Alternative Minimum Tax," in addition to the
taxes they would otherwise owe. Owning or purchasing too
much equipment, while lowering the traditional tax component, can now
trigger the addition of new added taxes. The good news:
equipment lease payments that are treated as rentals (real FMV) do not qualify as tax
preference items and have no adverse effect on AMT liability.

IMPORTANT NOTE: First Capital Equipment Leasing Corp.
does not offer tax advice and is not recommending that you
take an action with respect to the information presented. You
should review and discuss this program with your CPA and such
independent financial, tax, legal and other advisors as you deem
appropriate.